Amended in Assembly April 30, 2013

Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 905


Introduced by Assembly Member Ting

February 22, 2013


An act to add Section 1471.5 to the Civil Code, relating to real property.

LEGISLATIVE COUNSEL’S DIGEST

AB 905, as amended, Ting. Real property: environmental fee covenants.

Existing law provides for the recording of an instrument containing an Environmental Restriction covenant made by an owner of land or by the grantee of land to do or refrain from doing an act that is reasonably necessary to protect present or future human health or safety or the environment as a result of the presence on the land of hazardous materials.

This bill would also provide for the recording of an Environmental Fee Covenant, as specified, that is, among other things, imposed begin insertfor no more than 50 years end insertin connection with the installation on the property of equipment or improvements that are intended to promote, among other things, energy efficiency and the reduction of the consumption of water or other natural resources.begin insert The bill would require the instrument containing the covenant to include specified information including a legal description of the property subject to the covenant, the dates for commencement and expiration of the covenant, and a specified notice relating to the terms and conditions of the covenant. The bill would require the covenant to be subject to and subordinate to the lien and encumbrance of any first mortgage or any other mortgage against the property subject to certain requirements. The bill would require the covenantee, within a specified period following receipt of written notice from the covenantor, to provide the covenantor with written confirmation of specified matters relating to information about any outstanding obligation under the terms of the covenant. The bill would make findings and declarations in this regard.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

begin delete

  

end delete
P2    1begin insert

begin insertSECTION 1.end insert  

end insert
begin insert

The Legislature finds and declares all of the
2following:

end insert
begin insert

3(a) A significant percentage of California’s existing commercial
4building stock was built before the 1978 building standards. The
5installation of energy and water efficiency upgrades that are
6consistent with the latest building standards would benefit the
7owners and tenants of these buildings through increased property
8values and reduced operating costs, while also improving the level
9of comfort for tenants.

end insert
begin insert

10(b) Upgrading the existing commercial building stock with the
11installation of energy and water efficiency improvements would
12also benefit the environment through the reduction of energy
13consumption, water consumption, and greenhouse gas emissions.

end insert
begin insert

14(c) Although publicly funded programs exist to defray the cost
15of installing energy and water efficiency upgrades, commercial
16sector installation of these upgrades is constrained by the lack of
17access to affordable private financing opportunities for many
18commercial building owners.

end insert
begin insert

19(d) It is the intent of the Legislature to advance the achievement
20of the state’s environmental and economic goals by facilitating
21private funding opportunities for commercial building owners to
22install energy efficiency, water conservation, and clean energy
23improvements on their properties through the use of voluntary real
24property covenants with transfer fees that run with the land. This
25funding mechanism will provide the opportunity to distribute the
26costs of the improvements to a commercial building over a period
27of years and across subsequent owners.

end insert
P3    1

begin deleteSECTION 1.end delete
2begin insertSEC. 2.end insert  

Section 1471.5 is added to the Civil Code, to read:

3

1471.5.  

(a) Notwithstanding Section 1468 or any other law, a
4covenant made by an owner of land or by the grantee of land to
5do or refrain from doing some act on his or her own land, which
6doing or refraining is expressed to be for the benefit of the
7covenantee, regardless of whether or not it is for the benefit of
8land owned by the covenantee, shall run with the land owned by
9or granted to the covenantor if all the following requirements are
10met:

11(1) The land of the covenantor that is to be affected by the
12covenant is particularly described in the instrument containing the
13covenant.

14(2) The successive owners of the land are expressed to be bound
15thereby for the benefit of the covenantee in the instrument
16containing the covenant.

17(3) The covenant is an Environmental Fee Covenant pursuant
18to subdivisionbegin delete (e)end deletebegin insert (d)end insert.

19(4) The instrument containing the covenant is recorded in the
20office of the recorder of each county in which the land or some
21portion thereof is situated.

22(b) Except as provided by Section 1466begin insert and subject to
23paragraph (3) of subdivision (d)end insert
or as specifically provided in the
24instrument creating a covenant made pursuant to this section, the
25covenant shall be binding upon each successive owner, during his
26or her ownership, of any portion of the land affected thereby and
27upon each person having any interest therein derived through any
28owner thereof.

29(c) If several persons are subject to the burden of a covenant
30recorded pursuant to this section, it shall be apportioned among
31them pursuant to Section 1467, except if only a portion of the land
32is so affected thereby, the apportionment shall be only among the
33several owners of that portion.

begin delete

34(d) This section shall apply to the mortgagee, trustee, or
35beneficiary of a mortgage or deed of trust upon the land or any
36part thereof while, but only while, he or she, in that capacity, is in
37possession thereof.

end delete
begin delete

38(e)

end delete

39begin insert(d)end insert For purposes of this section, “Environmental Fee Covenant”
40is a covenant that meets all of the following requirements:

P4    1(1) The covenant imposes a transfer fee meeting the
2requirements set forth in Section 1098. The amount of the transfer
3fee imposed through the covenant, combined with the amount of
4the fee imposed through any prior Environmental Fee Covenant
5imposed on the same property, shall not exceed 2 percent of the
6full cash value, as defined in Section 110 of the Revenue and
7Taxation Code, of the property upon transfer.begin insert For purposes of this
8section, a “transfer” shall mean the conveyance of either an entire
9or partial undivided fee ownership interest in the subject property,
10and shall exclude any transfer which is excluded by Section 62 of
11the Revenue and Taxation Code from classification as a “change
12in ownership”.end insert

13(2) The covenant encumbers property that, at the time the
14covenant isbegin delete enteredend deletebegin insert recordedend insert, either does not contain residential
15units or contains five or more residential unitsbegin insert, provided that, with
16respect to property that contains five or more residential units,
17the covenant is not prohibited under any rules or regulations
18adopted by the Federal Housing Finance Agencyend insert
.

begin insert

19(3) The covenant shall not exceed 50 years in duration.

end insert
begin delete

20(3)

end delete

21begin insert(4)end insert The covenant is imposed in connection with the installation
22begin insert or constructionend insert on the property ofbegin insert the convenantor ofend insert equipment
23or improvements that are intended to promote any of the following:

24(A) Energy efficiency.

25(B) The reduction of the generation of greenhouse gasses.

26(C) The reduction of the consumption of water or other natural
27resources.

28(D) Compliance with Part 6 and Part 11 of Title 24 of the
29California Code of Regulations.

30(E) The generation of renewable energy using one or more
31means identified in paragraph (1) of subdivision (a) of Section
3225741 of the Public Resources Code.

begin delete

33(4)

end delete

34begin insert(5)end insert The covenant includes in its title the words: “Environmental
35Fee Covenant.”

begin delete

36(5)

end delete

37begin insert(6)end insert The covenant recites that it meets the requirements of this
38subdivision. It shall bebegin delete rebuttablyend delete presumedbegin insert, which presumption
39shall be rebuttable,end insert
that the covenant meets the requirements of
40this subdivision. The presumption may be overcome if it is
P5    1established by a preponderance of the evidence that the covenant
2fails to meet the requirements of this subdivision.

begin insert

3(e) The instrument containing the covenant shall:

end insert
begin insert

4(1) Specify the name of the covenantor and covenantee.

end insert
begin insert

5(2) Specify the address for the covenantor and covenantee.

end insert
begin insert

6(3) Contain the legal description of the property subject to the
7covenant.

end insert
begin insert

8(4) Describe the dates for commencement and expiration of the
9covenant.

end insert
begin insert

10(5) Contain an actual dollar-cost example of the fee for property
11priced at one million dollars ($1,000,000) or more.

end insert
begin insert

12(6) Specify the subordination of the covenant pursuant to
13subdivision (f).

end insert
begin insert

14(7) Specify the terms and buy-out amount for earlier satisfaction
15of the covenant.

end insert
begin insert

16(8) Include the following language in at least 14-point boldface
17type:

end insert
begin insert

18“BY ENTERING INTO THIS INSTRUMENT, COVENANTOR
19ACKNOWLEDGES AND AGREES THAT (1) THE COVENANT
20CREATED PURSUANT TO THIS INSTRUMENT WILL REMAIN
21AN OBLIGATION AGAINST THE PROPERTY UNTIL
22EXPIRATION OF THE STATED TERM UNLESS THIS
23COVENANT IS EARLIER TERMINATED IN STRICT
24ACCORDANCE WITH THE TERMS DESCRIBED IN THIS
25INSTRUMENT, (2) COVENANTOR’S OBLIGATIONS WITH
26RESPECT TO THE COVENANT MAY BE SATISFIED ONLY
27FROM PAYMENT OF THE TRANSFER FEE IN ACCORDANCE
28WITH THE TERMS DESCRIBED HEREIN, AND (3) THAT THE
29OBLIGATION TO PAY A TRANSFER FEE IN ACCORDANCE
30WITH THE TERMS OF THIS INSTRUMENT SHALL REMAIN
31IN EFFECT AND SHALL CONTINUE TO APPLY TO ANY
32FUTURE TRANSFER OF THE PROPERTY IRRESPECTIVE OF
33THE AMOUNT OF THE TRANSFER FEE PAID IN
34CONNECTION WITH ANY PARTICULAR TRANSFER.”

end insert
begin insert

35(f) (1) The covenant shall be subject to and subordinate to the
36lien and encumbrance of any first mortgage or any other mortgage
37against the property that secures the payment of any present or
38future financing used to either purchase the property or finance
39the construction of improvements to the property or any financing
40that replaces that acquisition or construction financing, provided
P6    1that any such financing is bona fide and at arm’s length, and
2further provided that after any action to enforce a mortgage,
3including, without limitation, any foreclosure or a transfer in lieu
4of foreclosure, the property shall remain subject to the covenant
5and the covenant shall continue to be valid, binding, and
6enforceable in accordance with its terms.

end insert
begin insert

7(2) For purposes of this section, a “mortgage” shall mean any
8mortgage or deed of trust recorded against the property in the
9official records of the county in which the property is located.

end insert
begin insert

10(3) A “first mortgage” shall mean any mortgage that has lien
11priority over all other mortgages.

end insert
begin insert

12(4) In no event shall a transfer fee be payable upon a foreclosure
13sale or a transfer in lieu of foreclosure.

end insert
begin insert

14(g) In those situations where the covenantor desires and
15requests, in writing, confirmation of information about any
16outstanding obligation under the terms of the covenant, including,
17but not limited to, the remaining term of the covenant and the cost
18to extinguish the covenant, the covenantee named in the instrument
19containing the covenant shall, within 14 days following receipt of
20written notice from the covenantor, provide the covenantor with
21written confirmation of the matters described in paragraphs (1),
22(2), (4), (6), and (7) of subdivision (e).

end insert


O

    97